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Notes Receivable and Allowance for Credit Losses
 3 Months Ended
Mar. 31, 2025
Receivables [Abstract]  
Notes Receivable and Allowance for Credit Losses Notes Receivable and Allowance for Credit Losses
We offer consumer installment payment plans on our platform. Consumer installment payment plans generally consist of four installments, with the first payment made at the time of purchase and subsequent payments due every two weeks thereafter. We purchase certain receivables related to installment payment plans extended to consumers in the United States by our originating partner and are responsible for servicing such receivables. All other consumer installment payment plans are originated by us. Our notes receivable represents amounts due from consumers primarily for outstanding principal on installment payment plans made on our platform that we have either originated or purchased from our originating partner. Our notes receivable are generally due within 42 days of origination.

We classify all of our notes receivable as held for investment, as we have the intent and ability to hold these investments for the foreseeable future or until maturity or payoff. Since our portfolio is comprised of one product segment, point-of-sale unsecured installment loans, we evaluate our notes receivable as a single, homogenous portfolio and make merchant-specific or other adjustments as necessary. Our notes receivable are reported at amortized cost, which primarily includes unpaid principal, adjusted for unearned transaction income, direct loan origination costs, and charge-offs. The amortized cost basis is adjusted for the allowance for credit losses within notes receivable, net.

As of March 31, 2025 and December 31, 2024, our notes receivable at amortized cost was comprised of the following:

(in thousands)March 31, 2025December 31, 2024
Notes receivable, gross$169,697 $194,434 
Deferred transaction income(2,547)(3,769)
Notes receivable, amortized cost$167,150 $190,665 

Deferred transaction income is primarily comprised of unrecognized merchant processing fees, which are recognized over the duration of the note with the consumer and are recorded as an offset to transaction income on the consolidated statements of operations and comprehensive income. Our notes receivable had a weighted average days outstanding of 34 days.

We closely monitor credit quality for our notes receivable to manage and evaluate our related exposure to credit risk. When assessing the credit quality and risk of our portfolio, we monitor a variety of internal risk indicators and consumer attributes that are shown to be predictive of ability and willingness to repay, and combine these factors to establish an internal, proprietary score as a credit quality indicator (the “Prophet Score”). We evaluate the credit risk of our portfolio by grouping Prophet Scores into three buckets that range from A to C, with receivables having an “A” rating representing the highest credit quality and lowest likelihood of loss. Our risk and fraud team closely monitors the distribution of Prophet Scores for signs of changes in credit risk exposure and portfolio performance. The risk and fraud team also regularly evaluates the integrity of the Prophet Score machine learning model and updates it as necessary, but at least annually. We last updated the Prophet Score model in October 2023.

The amortized cost basis of our notes receivable by Prophet Score and year of origination as of March 31, 2025 and December 31, 2024 was as follows:

March 31, 2025December 31, 2024
Amortized cost basis by year of origination
(in thousands)20252024Total20242023Total
A$57,634 $35 $57,669 $57,945 $— $57,945 
B66,391 323 66,714 74,999 1 75,000 
C34,591 8,119 42,710 57,646 — 57,646 
No score57 — 57 74 — 74 
Total amortized cost$158,673 $8,477 $167,150 $190,664 $1 $190,665 
Our notes receivable are considered past due when the principal has not been received within one calendar day of when they are due in accordance with the agreed upon contractual terms. Any amounts delinquent after 90 days are charged off with an offsetting reversal to the allowance for credit losses through the provision for credit losses on our consolidated statements of operations and comprehensive income. Charged-off principal payments recovered after 90 days are recognized as a reduction to the allowance for credit losses in the period the receivable is recovered. The amortized cost basis of our notes receivable by delinquency status as of March 31, 2025 and December 31, 2024 was as follows:

(in thousands)March 31, 2025December 31, 2024
Current$142,702 $161,870 
1–28 days past due9,412 15,303 
29–56 days past due5,235 6,267 
57–90 days past due9,801 7,225 
Total amortized cost$167,150 $190,665 

We maintain an allowance for credit losses at a level necessary to absorb expected credit losses, primarily on principal receivables from consumers. The allowance for credit losses is determined based on our current estimate of expected credit losses over the remaining contractual term and incorporates evaluations of known and inherent risks in our portfolio, historical credit losses, consumer payment trends, estimates of recoveries, current economic conditions, and reasonable and supportable forecasts. We regularly assess the adequacy of our allowance for credit losses and adjust the allowance as necessary to reflect changes in the credit risk of our notes receivable. Any adjustment to the allowance for credit losses is recognized in net income through the provision for credit losses on our consolidated statements of operations and comprehensive income. While we believe our allowance for credit losses is appropriate based on the information available, actual losses could differ from our estimate.

In estimating the allowance for credit losses, we utilize a roll rate analysis of delinquent and current notes receivable. Roll rate analysis is a technique used to estimate the likelihood that a loan progresses through various stages of delinquency and eventually charges off. We segment our notes receivable into delinquency statuses and semi-monthly vintages for the purpose of evaluating historical performance and determining the future likelihood of default.

The activity in the allowance for credit losses, including the provision for credit losses, charge-offs, and recoveries for the three months ended March 31, 2025 and 2024 was as follows:

For the three months ended March 31,
(in thousands)20252024
Balance at beginning of period$26,103 $12,253 
Provision for credit losses12,801 5,140 
Charge-offs(19,662)(9,027)
Recoveries of charged-off receivables1,280 817 
Balance at end of period$20,522 $9,183 

Net charge-offs by year of origination for the three months ended March 31, 2025 was as follows:

(in thousands)20252024202320222021Total
Current period gross charge-offs$(118)$(19,415)$(4)$(125)$— $(19,662)
Current period recoveries20 929 144 88 99 1,280 
Current period net charge-offs$(98)$(18,486)$140 $(37)$99 $(18,382)